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Rush Limbaugh the new Republican leader? It is
high time to discuss the state of the U.S.
economy, so, at the very least, to provide a
greater degree of clarity on the issues at hand.
The housing crisis is clearly the root of this
possible economic meltdown. But if you recall,
the entire fiasco began disguised as an endeavor
to house every American. In fact, the American
Dream of home ownership can be enjoyed by any
and every American. Of course, this was also the
battle cry of Republicans and of course the most
infamous of them all, former President George W.
Bush.
This initiative, disguised as the economic
impetus to allow all to live the American dream,
allowed Hattie Mae Johnson (our fictional
African American Home Health Aide earning twenty
five thousand dollars per year with a high
school education) to purchase a $250,000 home.
(Bear in mind that for every Hattie Mae Johnson,
our fictional African American character, there
are three Amber McCormicks, our white American
fictional counterpart. Hence, the housing crisis
does not have a pure racial bias.) Banks
willfully financed Hattie's loan and naturally
the loan was approved since the mortgage broker
suggested Hattie state $125,000 per year as her
'Stated Income.' Hattie's mortgage and many
others like hers were then packaged into exotic
security stock options and sold to unwary
European investors as golden investment
opportunities.
Furthermore, clever mathematicians created
intricate formulas to validate these European
stock options as triple A -- The most secure
investment possible. Nonetheless, let us not
forget that Hattie Mae's loan is the principal
component of the security option sold to unwary
European investors. Hence, the cycle begins.
Frenzied European investors smell opportunity in
American Home securities. European money is
thrown at American investment firms (Goldman
Sachs) in unprecedented volume. Investment firms
in turn throw money at mortgage brokers and
banks providing home loans. The only focus was
to build houses at break neck speed and fill
them with anyone with a pulse to insure the
continuation of the foreign investment revenue
stream.
Well... guess what? Hattie's adjustable rate
mortgage ballooned to twice her salary. Hattie
defaults on her loan. Secondly, the value of
those exotic triple A security investments held
by our friends in Europe begin to tank. European
investors begin dumping their plummeting
securities and the revenue stream dries up.
American banks, now without an outside cash
flow, stop lending money to consumers. The
economy slides into the gutter. However, there
is one more group of players in this drama. A
small but insightful group of investors
recognized the faulty foundation in which these
securities were built. This same group of savvy
investors purchased derivatives or insurance,
primarily from the AIG (American International
Group) Corporation, to be collected in the event
of a decline in the security value.
Well, we all know the rest of the story. The
securities tanked. The savvy derivative
investors hit the jack pot and now AIG has to
get bail out money to pay these same investors
off. Now, President Obama comes on the scene. In
every sense, he is now being handed a bag of cow
dung as flour and not only asked to bake a cake,
but, to also make certain that it has a
wonderful flavor. Well, he can modify the loan
so Hattie can afford to pay her mortgage -- or
he (the government) can buy Hattie's home and
charge her rent i.e. a modern day housing
project. Clearly, this housing scheme rivals the
magnitude of the Madoff ponzi scheme. But now
that we've put the economic crisis in
perspective, I think that it is imperative to
offer pragmatic and sound solutions to this
enormous challenge.
However, bear with me as I digress into a
fictional story that may serve as both an
analogy and window of opportunity to repair
dysfunctional elements of our current economic
system. There was once a Gynecologist that we
will call Dr. Greedy. As Dr. Greedy poured over
his monthly bills, he realized that his current
income was insufficient to cover his mortgage,
his child's school tuition, and his wife's
Jaguar car payment. As he lay awake at night,
pondering over possible ways to increase
revenue, Dr. Greedy has an epiphany. He awakes
his sleeping wife and says, "Honey, I've got it.
I know how I'm going to double the amount of
money that my medical practice is generating."
"How are you going to do that Bernie?" she
replies. "I'm going to perform hysterectomies on
everyone!" "Everyone!" she replied. "Yes,
everyone. I will say that every woman has
Endometrial Hyperplasia with Atypia which is a
precancerous condition of the uterus and that
will justify every hysterectomy that I perform."
"Well, don't you have to biopsy the Uterus
before the hysterectomy to prove that
Endometrial Hyper thing you were saying?"
replies his wife. "No, I've been on staff so
long that I can just write it in as a 'Stated
Diagnosis' and no one will follow up on it." The
next day Dr. Greedy implements his plan. Within
two months, Dr. Greedy's hysterectomy rate has
increased 900%. Additionally, the pathology
reports from the uterine specimens that Dr.
Greedy has been removing all come back as normal
with 'No Evidence of Endometrial Hyperplasia
With Atypia.' Two months after initiating his
plan, Dr. Greedy is called into the
Gynecological Departmental Chairman's Office.
The Chairman said," Bernie, a month and half ago
I was very impressed with the fact that you were
discovering an extraordinarily high amount of
pathology in our community and treating it with
surgical intervention, in effect, wiping out
cancer. Additionally, I was also impressed by
the additional patient and revenue flow to our
hospital since we were revered for our disease
detecting capabilities. However, News Channel 4
is outside our building with pathology reports
claiming that you falsified the diagnosis of
each and every surgery. Bernie you're fired!
Hand over your license."
Our example brings to light the parallel between
the housing markets branded campaign and Dr.
Greedy's superficial intent. Although Dr.
Greedy's true objective was to make money for
himself, he touted his motive as an initiative
to eradicate uterine cancer. Sound familiar? The
housing crisis' motif began as a campaign to
allow every American to own their home.
Falsified diagnoses and falsified incomes are
consistent themes in both scenarios. (Despite
our fictional story, there are legitimate means
by which physicians may increase their income -
read my book, "A Doctor's Guide to Wealth") This
example also illustrates that inherent within
the medical profession, certain fundamental
oversights exists. In the absence of these basic
oversights Dr. Greedy's deeds would go
unchecked.
So too must basic governmental oversight exist
in today's market economy. For starters,
mortgage lenders must do away with 'Stated
Income' loans and verify incomes based on annual
tax return documents. Similarly, Dr. Greedy's
plan would have fallen short if he was required
to submit presurgical tissue pathology results
on each patient prior to a hysterectomy.
Secondly, The Government, SEC, or some other
'qualified' agency must raise questions when the
mortgage lending rates increase 900% as Dr.
Greedy's surgical rate did. These same agencies
must improve their ability to designate triple A
stock securities by not qualifying inferior
products as triple A. This Governmental agency
would in effect be equivalent to a departmental
Chairman. Our government or any regulatory
agency failed to raise inquiries in response to
basic indicators, such as exploding home
mortgage loan dispersion rates.
So, who is to blame in this current economic
mess. Well for starters, the mortgage companies
knowingly wrote bad loans. But the Investment
CEO's are first on the list since they collected
loads of European cash which fueled the effort
to create and package toxic American assets that
were ultimately sold abroad to European
investors. Government and regulating agencies
were at fault for looking the other way. George
W. Bush was infamous for saying that government
should not "interfere with the free markets."
The mere sound of any oversight might be
suggestive of an impairment of freedom.
Nonetheless, our system is not irreparable. It
needs only to be adjusted. Let's save those
facing foreclosure in order to circumvent our
communities from ruin - both Hattie and our
hysterectomy patients served as instruments to a
larger scheme. They do not deserve to be made
scapegoats. In the future, let's give mortgages
based on verified income variables as opposed to
falsified ones. Lastly, let's make the resulting
stock securities have inherent worth reflective
of the quality owner residing in each respective
home and let's label them appropriately, i.e. a
triple A security is truly of superior merit.
This will, subsequently, detoxify American
assets and securities.
So, in closing, before we bash, criticize, or
judge our newly elected president, let's
understand the enormity of the situation. But
above all, particularly Republicans - Don't root
for President Obama to fail. A failing President
Obama equates to a failing America - and last I
checked, we're all in this together.
Robert E. Rainer, MD, is a graduate of the
University of Maryland School of Medicine. He
completed his residency training in obstetrics
and gynecology in 1995 and shortly afterward
established his medical practice (see:
www.brooklyngynplace.com ). Dr. Rainer's
practice flourished and is now a leading OB/GYN
practice in New York City. Get his book:
www.doctorsguidetowealth.com/index.htm |
